Optimism released the testnet, which was the big news in the Layer 2 field last week.
The Chinese name of Layer2 is the second-layer expansion solution. In view of the limited processing capacity of Ethereum and the high gas cost, the project of Layer2 has risen in popularity recently. Among many solutions, the Optimistic Rollup developed by Optimism has been included Compliments or cooperation from Vitalik, Uniswap, Synthetix and other parties.
On the same day that the Optimism testnet was released, the well-known synthetic asset platform Synthetix also announced the Layer 2 version of the demo, using Optimism's Layer 2 solution for SNX casting management.
In the eyes of many people, OR's solution is excellent and reliable. It not only has the security features of Ethereum, but also does not require issuing coins. OVM (Universal Virtual Machine created by Optimism) is also perfectly compatible with EVM (Ethereum Virtual Machine). In this way, a universal solution is provided, allowing many Ethereum applications to be easily migrated and upgraded, and Layer 2 is used to increase application scalability. In the previous article, we also gave a more detailed introduction to this.
Here is an explanation of what is Rollup? To put it simply, multiple transactions are aggregated and then compressed into one transaction and sent to Ethereum. In this way, the second layer network is used to share the transaction pressure of Ethereum, thereby saving transaction costs.
In order to ensure that the transaction is effective, so that the transaction on Layer2 has the same security as the transaction on Ethereum, different teams have also proposed different solutions, the common ones are ZK Rollup and Optimistic Rollup. The former uses zero-knowledge proof to ensure safety, while the latter refers to Plasma's penalty mechanism.
OR: Share the load of Ethereum
In an article published in banless in April 2020, Daniel Goldman discussed various aspects of OR and DeFi applications. This article discusses the issue of composability, and most of the thinking comes from this article.
In Rollup's scheme, the side chain shares the transaction pressure of the Ethereum network. From the user's point of view, it can be divided into two parts.
First, the user deposits funds into the smart contract on Ethereum, and the funds are transferred to the rollup chain on the second layer. How to ensure that funds will not be misappropriated by rollup operators or users? How to ensure that users do not need additional trust in transactions? This will test the design of the rollup chain.
Secondly, if users want to return their assets to Layer1's Ethereum, they need to initiate a special withdrawal operation. Under OR's security model, a grace period will be designed to prevent fraud. To put it simply, users need to wait for a certain amount of time to retrieve assets to Layer 1. Some researchers think that about 3 hours is enough. Through the existence of liquidity providers, waiting time can be reduced.
However, there are also different opinions.
Matter Labs CEO Alex Gluchowski believes that OR is not the best DeFi expansion solution. He prefers ZK Rollup. "How will Optimistic Rollups succeed in fulfilling its promise of 100% composability? We don't know yet. So far, we haven't discovered the hidden pitfalls. This technology is not as simple as it seems."
In addition, Alex is also worried about the long waiting period for users in the OR scheme. Although it can be alleviated by introducing liquidity providers, it needs to be matched in a manner similar to the decentralized transaction using the order book. Quick divestment may become a problem.
DeFi
The challenge of composability
The Layer 2 solution implemented by Rollup technology is equivalent to creating one or more side chains, and technical means are used to ensure that transactions on the side chains are equally effective.
There are multiple DeFi scenarios on the same rollup chain
This is the simplest case in Layer 2: Different transactions exist on the same rollup chain, and the processed results will be sent to the underlying Ethereum network. In this way, the complexity of cross-chain operation communication disappears, and the use of different DeFi for assembly and assembly is almost the same as on Layer 1. The only difference is that when assets need to be converted to native accounts, users need to spend time waiting. This is a situation that all Layer 2 solutions will encounter.
Although the composability between DeFi will not be affected too much, there are also problems: if a large number of DeFi applications and transactions are concentrated on the same rollup chain, the advantages brought by Layer 2 will be discounted. Although the Layer 2 solution can improve performance, as a large number of users enter the same Layer 2 chain, no matter which solution is adopted, they will also face this problem.
However, this is actually nothing to worry about. Because in the future, the same situation will occur after Ethereum 2.0 is launched. Although different shards are used, in different shards, just like the scattered spaces in the city, there will also be financial districts, and DeFi will be clustered. In the financial district/financial shard, compared to other shards, the transaction volume is more concentrated and the fees are higher. This is consistent with what we will see in the future in the Layer 2 field.
Due to Ethereum's DeFi head effect, it is not surprising that future DeFi applications will be concentrated on a certain Layer 2 ecosystem or even a certain special chain. At present, Optimism is creating a universal OVM, and is also promoting cooperation with the head Uniswap and Synthetix, which is the embodiment of this kind of effect.
Between different rollup chains or different Layer schemes
DeFi is on the Ethereum of Layer1, just like a roommate in the same room, eating, drinking, playing and fighting, and it's intimate. And if a different Layer 2 scheme is adopted, or the same scheme is adopted but on different rollup chains, then they are like neighbors living on the same street and in different houses, and have more space for activities, but they communicate with each other. Compared with collaboration, there are more barriers than before.
Different operations have different complexity. Since it is difficult to say whether DeFi with different Layer 2 schemes can operate with each other, we will mainly look at examples of schemes such as OR.
If it is just a simple transfer of assets, such as transferring DAI from one DeFi application to DeFi on another rollup chain, there is nothing too difficult. But if it involves complex operations, it's hard to say.
In Daniel Goldman's article, he cited the example of PoolTogether's lossless lottery.
Users deposit funds to PoolTegether, and the funds deposited by users PoolTogether will be deposited in DeFi platforms such as Compound to earn interest. Once the platform draws a prize every other time, the winners can get the income of the platform during this period of financial management, and those who do not win can also get back the principal. During the whole process, the platform does not draw commissions, and users only need to pay the handling fee when initiating a transaction.
Assuming that PoolTogether, Compound and Dai are on three different rollup chains, and PoolTogether wants to deposit Dai assets on Compound, this transaction is not that simple.
There is one-way monitoring: the rollup chain (a chain of Layer 2) where PoolTogether is located requires the ability to access and "listen" to the update information of the rollup chain where Compound is located. There is a more complicated situation: two-way dialogue. In some cases, both parties need to know the status of each other's Layer 2 chain.
How to achieve cross-rollup chain communication is similar to the cross-region communication of sharding in Ethereum 2.0. It requires the help of a set of system architecture protocols, and whether the Layer 2 solution provides such support is not general.
In short, when there is one more chain or multiple solutions, the complexity increases rapidly, and where the complexity increases, it is often easier to hide errors and need to be treated with caution.
Combining DeFi applications across Layer 2 solutions can be a tricky problem. Even in the same Layer 2 solution, if different side chains are involved, it depends on the underlying support provided by the Layer 2 solution such as OR.
Layer2: a long spectrum
After the above discussion, we may be able to get a bit of enlightenment: Since the method of concentrating all on one Layer 2 chain will cause congestion, and communication based on Ethereum, different Layer 2 schemes or different rollup chains is also troublesome, can you Combine the two?
this is possible. Going back to the previous example, financial districts, entertainment districts, and shopping districts are inevitable in cities. In the Layer 2 field, as time goes by, there will also be Layer 2 chains that focus on DeFi, and Layer 2 chains that focus on games. But through the subway, CBD can be connected to residential areas, just as different Layer 2 solutions can communicate with each other by means of communication protocols.
Considering the particularity of DeFi, the author believes that it is not surprising that the head DeFi is concentrated in a certain Layer 2 ecology. And don't forget, the same DeFi can still set up "divisions" on different layer2s to form synergy. Focusing and decentralization, with the help of communication protocols or the underlying Ethereum to achieve intercommunication or one-way monitoring, will be a simultaneous phenomenon in the Layer 2 ecosystem.
summary
Ethereum is blocked and blocked, and Layer 2 hopes that the winding path will be quiet, and it will find another way. Layer2 promises a better future. Applications and users can get better services and experience as needed, with smoother networks and lower costs.
As far as the current Layer 2 solution is concerned, although some evaluations believe that the current test network performance is not as good as expected, OR (Optimistic Rollup) provides a set of promising solutions, which is also the focus of this article.
With the progress of the second layer network (Layer2) related projects, we should have more options to choose from; and as the head application gradually favors the combination of DeFi + Layer2, how to achieve interoperability between DeFi, we Will see more interesting ideas.
The author believes that observing the development of Layer 2 is to a certain extent prying into the future of Ethereum 2.0. As far as Layer 2 is concerned, does DeFi converge and live together? In what way will the gathering and dispersion appear in different Layer 2 solutions, and what effort will be spent to improve the user's experience of using DeFi. These are all left for time to give us the answer.
But one possible result is that with the gradual development of Layer2, the composability of DeFi may become fragmented in a short period of time.
